In recent years, we have observed the rise of leveraged portfolios, especially those with an income-yielding component. Responding to investor queries, we have recently analysed the investment merits of a geared portfolio based on Asia Pacific REITs. We created a base portfolio, using a 50:50 split between Asia Pacific REITs and Asia Corporate Bonds.
Since July 2016, our firm has noticed that internationally-minded investors have taken a renewed interests in Asian real estate. Recent data from both Hong Kong and Singapore real estate developers suggest that home sales are picking up.
One sign of a Real Estate Investment Trust (REIT) market reaching maturity is the ability of existing REITs in raising significant capital for new acquisitions. Using this metric, the recent deal completed by Mapletree Commercial Trust - where it raised $1 billion for acquisitions - certainly adds to the track record of the Singapore bourse.
In the last two decades, computers and the Internet have transformed the economy around the world, and quite naturally, company fortune has risen and fallen with each generation of technology.
Successful REITs may seek additional opportunities abroad to broaden their portfolio and to provide additional growth for their investors. In some situations, investing abroad may benefit higher income yield and, if acquired properly, additional risk-adjusted returns.
Hotel investments have been considered to be riskier than other real estate related investments over the past decade. However, several factors and how hotel owners are diversifying by investing and capital management, hotel REITs might be more attractive for investors now.
In our previous article, we discussed some important factors to take note in the economy right now. Moving forward, we will be taking a look at the real estate sectors in the Asia-Pacific region and some of our thoughts about the sector.
Despite the fact that the US Federal Reserve has started to raise its interest rates, Admiral believes that the interest rate environment should remain benign in 2016. Given the slowdown in the China economy, we continue to expect seeing opportunities in REIT programs.